Volatility Funds Top Premarket Gainers

By Brendan Conway

The Dow Jones Industrial Average‘s low-volatility streak is under challenge Tuesday thanks to fresh jitters ahead of Thursday’s Greek-bond swap deadline. A handful of trading vehicles that zip when the markets grow rough are among the top gainers in this morning’s entire stock market.

The ProShares Ultra VIX Short-Term Futures ETF (UVXY), up 11% in premarket trading, is currently the fourth-biggest percentage gainer in Tuesday’s early action, according to FactSet Research Systems. Worth noting here is that investors used to see to a different product, the VelocityShares Daily 2x VIX Short Term ETN (TVIX) zipping higher when markets were looking rough. But Credit Suisse (CS), which backs that note, recently stopped creating new units and has left the product trading at a premium in the ballpark of 15% to 20%.

One of the riskier and more interesting trades coming up is going “short” TVIX and long the underlying futures in a bet that Credit Suisse will re-open creations. But it’s anybody’s guess when they will do that.

Meanwhile, two of the three top off-hour price gainers are the VelocityShares Daily Long VIX Short-Term ETN (VIIX) and the ProShares VIX Short-Term Futures ETF (VIXY).

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There are 3 comments

MARCH 6, 2012 2:32 P.M.

Bob Whaley wrote:

"left the product trading at a premium in the ballpark of 15% to 20%." Are you sure that is still the case?

MARCH 7, 2012 10:44 A.M.

TDog wrote:

TVIX was trading at a decent premium based on Indicative Value before yesterday. But it reduced that difference substantially in one day (TVIX.IV). UVXY had a good day, but with the 1:6 reverse split coming at today's close, it may have lost its appeal. With share creation halted in TVIX, supply is now limited and demand could increase as traders flee UVXY, if the market falters. Now that the indicative value has caught up with the share price substantially, the risk of loss due to correction if share creation is re-started is less of a concern or issue. UVXY, however, will get shorted to oblivion because of the reverse split, if the pattern of reverse-split ETF's holds true.

MARCH 12, 2012 5:04 P.M.

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